Challenges and Opportunities in the Internet for Media Companies

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Apresenta uma análise da contribuição e desafios enfrentados por empresas de mídia na elaboração, desenvolvimento e manutenção de portais corporativos. Alerta para a importância da estratégia de GC como forte aliada para o sucesso do empreendimento.
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Challenges and Opportunities in the Internet for Media Companies

  1. 1. Discusses the contributions and challenges that media enterprises face in the development and implementation of corporate portals, and presents the Knowledge Management as key factor to the success of the portal. ! I. Introduction To date, very few large media companies have been able to Media companies have traditionally successfully develop Internet business provided news, information and models. In the US, in particular, most entertainment for large audiences with of the largest media companies, a combination of proprietary (more including Disney/ABC, NBC, Time often) and third party content (less Warner and Hearst have retreated often). At the same time that we are from their initial strategies after seeing the growth of the one-to-one burning a lot of money in ill-thought marketing utopia, we are also seeing a and/or poorly “portal” executed strong trend towards major strategies. NBC, for instance, decided consolidation of the media industry in to fold its separate Internet subsidiary the search for mass audience and back into the regular operations of guaranteed distribution in an NBC in the second quarter of 2001. increasingly fragmented world. This decision came after reports that showed that this company in the last There’s a big rush occurring to gain quarter of 2000 had a net loss of US$ scale and to leverage off-line assets 47 million on revenues of US$ 31 (content, brands, customer base, million. If asset write-downs and distribution etc). The recent wave of restructuring charges are included the mergers and alliances of large players total net loss reached a staggering in the media and telecom industries is US$ 245 million1. representative of the challenges and trends in this market: Viacom/CBS; AOL/Time Warner; Vivendi/Seagram; Even the deep pockets of some giant Tribune/Times Mirror; Terra Networks media companies have not been / Lycos, etc. In Canada, major sufficient to ward off attacks from new mergers are also fresh in the memory: entrants and much larger IT/Telecom CanWest/Southam; Bell/Globe/CTV; companies. AOL’s purchase of Time Quebecor/TVA; etc. Warner is testimony of this. In the end, the more cautious approach of CBS/Viacom has proven to be a lot ©TerraForum Consultores 1
  2. 2. more successful. Its Internet divisions This means a “commoditization” of the are now on the path for profitability. value of their branded content and CBS/Viacom adopted a very focused loyal audience. strategy based on its core competencies and TV programming: it In order to examine the Internet made a few successful investments in revenue opportunities for media sites, like Marketwatch and Sportsline, companies on the web, it’s necessary that could be clearly promoted and to understand the developments being linked through its programming and promoted by the leading portals. TV advertising inventory. These sites command the bulk of Internet traffic and ad budgets and are The demands of integrating an ever- “pushing the envelope” in terms of increasing suite of technologies, creating winning value propositions content, e-commerce partnerships and that meet the needs of users and distribution have proven to be a advertisers. The following numbers challenge beyond the core highlight the importance of the portals competencies of traditional media for Internet advertising: companies. Execution has proved to • 60% of a typical online session be much harder than the vision. Most includes visiting a portal3. have realized by now that they will not • Search engines/portals be able to compete in the same accounted for 37% of all “game” or mimic the portals’ strategy Internet advertising revenues across the board. Despite its from January through incredible fast growth over the last few September, 20004 years, revenue models based strictly on Internet advertising are proving, in Portals started as a point of entry to fact, to be very difficult business the Internet and have evolved to models. Content (and original destinations by providing aggregation proprietary content specially) of third party content (and more hardware, software and connectivity recently proprietary content), can be very expensive. functionality and e-commerce. The lines between these new entrants, the Only the very large mass-portals have portals, and traditional media been able to find a path for profitably companies are becoming increasingly (or to be close to break-even) based less marked. Portals are starting to on Internet advertising. In fact, the top create their own content and ten media properties (including expanding off-line. Some media portals) command most of the companies have integrated many of advertising budget and revenues in the traditional functions of a portal most countries (69% in the US)2. Even such as search, community, email, so, recent challenges and trends in the calendar, services, etc. marketplace point to a marked effort on behalf of large portals to find Per definition, portals offer a point of alternative sources of revenues. Media entry to the Internet. As such, the companies had best not try to challenge for portals is to provide a compete essentially on a CPM basis. good balance between proprietary ©TerraForum Consultores 2
  3. 3. content (or content provided through on all of these fronts has separated alliances with third parties) and link- the leaders from the followers in this outs to relevant external content. space. More often than not, achieving Yahoo does this superbly. They offer this success has required superior relevance, context and the power of skills at striking win-win partnerships the Internet. This requires the use of with different players along the value- sophisticated content management chain. In the end, the trusted systems and editors. Portal leaders relationship developed with the users understand this: they pay particular and the traffic generated need to be attention to the process needs and converted into revenues. It’s clear, technology requirements in order to however, that traffic inventory on the manage different kinds of content and web exceeds demand. Consequently meet end-users expectations. business partners (advertisers and e- commerce) are increasingly insisting The early movers, such as Yahoo on targeted audiences and result- became leaders in this space by based relationships. Although banner moving fast without losing focus on the and sponsorship advertising still ultimate needs of the end-user. They represents the bulk of revenues (74% have been able to rapidly integrate of the total revenue pie in 2000)5, it design, technology, applications and has certainly lost much of its initial content, while at the same time momentum. Portals are increasingly leveraging proprietary distribution and developing new formats (interstitials, pre-existing customer relationships. rich media, email marketing, referral Successful portals have been deals, etc), paid communication particularly adept at creating trust- subscriptions (e.g.,IP telephony, based environments where content is hosting) and a share of transactions relevant, accurate and timely; started through their sites. communities thrive; and the users engage in increasing deeper The provision of a seamless, relationships with the portal through consistent and personalized personalization. ISP portals such as experience anywhere and anytime, AOL and @Home can also leverage along with the integration of different their direct billing relationship with media assets delivered through a most of their users. variety of devices represents the most current battleground for the leading The competition for brand recognition portals. A graphical illustration of the and for customer loyalty has been industry landscape that highlights the fierce. The ability to work successfully points above is depicted below. ©TerraForum Consultores 3
  4. 4. Portal Business Landscape Partnerships Exclusive Internet BRAND - EXPERIENCE - RELATIONSHIP - TRUST Content Content & Transactions Content PORTAL Distribution Device Applications • Open or closed • PC Advertising • Bandwidth ? • TV • Content • Identity • Wireless • Search • Context E-commerce • PDAs, etc • Community • Personalization • Tools • Navigation “Increasingly alliance driven” On a Global basis, AOL, Yahoo and CTV and now Globe and MSN are the clear winners in the Mail properties) have Internet mass media game, followed at strong positions through a a distance by companies like Excite combination of distribution and Lycos. All other players need to ownership (dial-up, find their own niches and vertical broadband and wireless), markets to compete. In Canada, very cross-media promotions few traditional large media companies and access to technology have been successful in turning their provided by Excite.com and existing off-line assets into on-line Lycos.com. They are both advantages and the overall market is strong contenders in the quite fragmented. Under these long run. Sympatico/Lycos circumstances it is very difficult for any is already a leader. Its main player to turn a profit. A very brief challenge in the short-run is overview of the strategy of the key to define a winning portal and traditional media players is branding strategy discussed below: (Sympatico? Lycos? Bell? Globe? Etc) • Integrated ISP & Portal - AOL Canada has been players: rather timid in Canada. Nonetheless, given its - Excite Canada (backed by alliance with the Royal Rogers and Shaw) and Bank, the support of its Sympatico (backed by Bell, parent company, and its ©TerraForum Consultores 4
  5. 5. high brand awareness, mostly importantly, AOL Canada must be seen cross-promote its as a strong contender. properites. - Smaller players include: CBC presents a unique Quebecor (Videotron + Canadian brand, a loyal Canoe) and Telus customer base (MyBC.com, (especially in certain MyAlberta.com, etc.). They areas of country and are particularly strong, segments of the respectively, in Quebec population) and depth and West Canada. of content that can be leveraged on the • Pure portal players Internet. The Globe and Mail has - Yahoo.ca and MSN.ca are been very effective to also likely to remain date to leverage its amongst the leaders in this brand, content and core space, leveraging the assets to the Internet brand, technology and (With the merger with deep pockets of their Bell, its reach is parent companies in the expected to grow even US. They have also faster). developed low cost Rogers Publishing has operational business many online magazine models. brand extensions. Chatelaine is probably • Traditional media companies the most successful. None of these initiatives - The only Canadian media seem to have a companies with a significant stake in the significant national reach Canadian Internet are CanWest, CBC, advertising pie or a GlobeMedia (e.g CTV and positive impact on the Globe and Mail) and many magazines Rogers Publishing (e.g. owned by Rogers Macleans and Chatelaine). publishing. CanWest properties, - Torstar properties show including Canada.com significant traffic levels in and GlobalTV.com, is Ontario (e.g. Toronto.com; the largest media TheStar.com) and are player in the country reasonably well integrated and will likely try to with the newspaper. differentiate its content - CityInteractive is still taking offering, execute a very low-budget distribution partnerships approach to the Internet. (e.g. wireless) and, The Internet properties are ©TerraForum Consultores 5
  6. 6. small product/brand • Up-to-date technology extensions of their TV deployment; channels. It’s well centered, • User interface design; however, around their core • Distribution strategy; audiences (e.g. MuchMusic – music fans). Below, we discuss in more depth - Other large broadcasters some of the key elements involved in and media companies such creating winning Internet strategies for as CTV (prior to being media companies. In particular, we acquired by Bell), Corus, discuss how traditional media Alliance Atlantis, YTV, Key companies could carve out a winning Media Ltd, TVA and TSN value proposition to compete in this have had only a timid space against the “portal” leaders. The presence in the Internet traditional media companies may not scene to date. TSN, be able to follow the same strategies leveraging some of the as portals for various reasons learning of ESPN is (financial constraints, late into the probably the most game, lack of skills etc). It’s important, advanced in terms of however, for media companies to build integration between its on their off-line strengths and to Internet site and TV understand the directions that the programming. All have yet portals are taking since they are the to show a clear path to ones commanding the largest share of profitability in their Internet the Internet advertising budget. This is investments. not to say that media companies need to imitate portals’ strategies. They In order to stake a claim in the should, however, try to learn from Canadian advertising Internet budget, these businesses and find their own most Canadian media companies will deep roots and points of leverage in a need, however, to get up to speed in a very competitive market (which has number of critical elements: also meant a very unprofitable market • Development of content for most companies). that can be leveraged in all mediums as opposed to II. Branding & Content strategy simply repurposing content. This will require a lot of The market has finally recognized that training. Content creators very creative branding and marketing will need to consider the initiatives are necessary in order to interactivity potential of develop a viable business model on most editorial projects very the Internet. It’s no longer possible to early on. spend large amounts of money in • Creative innovative ways to developing mind-share that does not leverage the Internet to the translate into traffic, trust, registration benefit of their traditional and transaction. The right set of advertisers. partnerships with distributors (Telcos, ISPs and portals) can help media ©TerraForum Consultores 6
  7. 7. companies reach large audiences at It requires no crystal ball to predict minimal marginal costs. These should that, in a couple of years, the Internet be done, however, with extreme care: will power every single medium and proper quality of service, integrity of electronic device. In this context, the customer experience and branding user will determine the kind of specific should be enforced at all times! experience he or she is seeking at anytime: passive or active; audio, Branding on the Internet is very much video or text; anonymous or not, etc. related to the user experience over Multi-media companies have an multiple touch points and interactions. undisputed advantage in terms of The Internet is also a fabulous cross-promotion. This advantage can medium where “word of mouth” or “ only grow in importance over time. In world of click” can play a significant the future, however, the user will have role in extending the brand (ebay and access to all sorts content and hotmail are great examples). Every functionality regardless of medium of user’s email, invitation for a chat or access. sending of a link to a friend can play the role of a testimony and/or of an Media companies should also, at all invitation. Chat and forums can also times, make sure that their content is rapidly spread messages or rumours not “commoditized” to ensure that about companies. This, of course, can “Content is still the King”. That means be good or bad depending on the spin ensuring that their content is always that the story takes. It’s clear, branded, properly valued and therefore, that the Internet reduces the judiciously distributed. This is, control that companies have over their particularly, important for smaller messages to the public. media companies (e.g. magazine publishers): they cannot compete, It is important, therefore, that the exclusively, on a CPM basis. design of the user experience Advertising selling requires art & supports the brand identity and value science. The old maxim: start by proposition that is articulated in the understanding “advertisers’ needs and market place be it offline or online. goals should not be forgotten in the With respect to the development of Internet just because it’s much easier brand identity along with design to get into the numbers game. A good efforts, particular attention should be creative strategy still has a lot of value given to the fact that the brand and for advertisers. user experience should be consistent regardless of the means of access Few companies, even large (speed of connection and device of multimedia companies, can play a true choice). A negative experience in one portal game as defined by Yahoo point of control can certainly affect the (organized port of entry to the Internet, overall brand experience and is hard aggregation of all sorts of content, to modify afterwards. This is, of multitude of communication services, course, of particular importance to ecommerce, etc). Therefore, defining traditional media companies. what kind of content to focus on is also a highly strategic decision. It is well ©TerraForum Consultores 7
  8. 8. known that in most mass-market content. TV broadcasters more often portals: than not have worked with • A few channels account for a independent producers and very large proportion of traffic syndicated programming. The print and revenues; media has also developed many types of working relationships with • The channels with most traffic freelancers and special contributors (e.g. chat, email) are not (writers photographers, designers, necessarily the ones etc). The Internet takes this generating most of the experience to an even higher level: revenues; hyperlinking makes content • Some areas of content are outsourcing much easier to implement. much more expensive to Moreover, the Internet allows maintain than others (e.g main seamless integration of content and content costs: hosting, services. The implications for content bandwidth, production, etc); providers and media companies are • The most profitable user base very important and should not be has the following attributes: it taken lighlightly. The decision to has a low cost of acquisition, produce content internally should be and is targeted, loyal and taken only after careful cost-benefit highly demanded by business analysis: partners (advertisers and e- • Does it provide a unique commerce players). perspective and value to the Besides defining content topics or end-user? areas, there are many other aspects • Is it cheaper to outsource? that any media company should • Can it be repurposed or consider when developing an Internet provide value to other content strategy. The following key six mediums and non-competing overlapping aspects will be considered players? here: II. 2. Users’ Participation in Content 1. Strategy for content production Creation 2. Users’ Participation in Content Creation Media companies have always played 3. Personalization a role in establishing links or 4. Syndication & Subscription representing specific communities. 5. Multi-channel Integration The media companies that continue to 6. The Wireless and Interactive develop programming, now aided by TV opportunities the Internet tools, that supports the 7. Broadband growth and loyalty of specific communities will have a strong II.1. Strategy for content production competitive edge. With the much- anticipated convergence of the Many media companies have mediums starting to happen, traditionally used a combination of in- interactive programming is likely to house production and outsourced ©TerraForum Consultores 8
  9. 9. benefit from highly participatory while at the same time developing audiences. ways to convert traffic and loyalty into revenues. Careful thinking of the If media companies clearly focus on business model and the integration of their existing communities and areas content, tools, and highly intuitive of strength in content, their value design is required. The most proposition will also make sense for successful portals have clearly relied advertisers. Therefore, it’s important to on strong community support. create communities that are relevant to advertisers by farming The Internet allows very different psychographic clusters. The levels of users’ participation (see communities strategy should, figure below). Users’ participation may therefore, bring in all mediums the reduce costs of content production, message, design and advertising provide higher degrees of loyalty and opportunities catering to these lots of ideas for both online and offline segments. product development and. Traditional media companies, however, have Communities (and especially targeted usually operated in a broadcast model. communities) can become a source of Furthermore, many of their employees very interesting and low-cost targeted in charge of content creation do not content. This is important since follow the fast-paced technology content development is a very change. Therefore, it’s quite realistic to expensive proposition that very few think that, in the next few years, we companies can afford. The beauty of will be seeing a number of many community-based traffic is that it’s a media companies being left behind in highly scalable business proposition. the competitive race to develop new Again, the challenge for portals or ways to think and implement about media properties lies in their ability to content. foster the development of communities Levels of users’ participation in content creation n io at Customer-driven: chats & forums ip tic Real-time interaction with program ming p ar r se Real-time polls o fu l Surveys, letters, feedback, etc ve Le None ©TerraForum Consultores 9
  10. 10. II. 3. Personalization users to customize their experience, and then learn from their behavior. Personalization, or tailoring content Ultimately, the most sophisticated and/or individual customer sites have a “pull” and “push” experiences based on implicit and approach to personalization (see explicit data, is a critical component of figure below). They make intelligent customer intimacy. Accessible predictions about users’ preferences personalization features should and display content (or advertising) appear transparent to users by based on individuals’ stated incorporating them into regular preferences, demographic information browsing paths that minimize effort. and behavior (based on real time or Successful sites go beyond mere cumulative data) during visits to the utility: they achieve an emotional site. connection with customers by allowing Personalization strategies User Control Yes No PULL PUSH Based on set of preferences Based on site Based on behavior demographic - Accumulated data information - Real-time data As users invest more time and divulge requires, however, overcoming a few more information, personalized service hurdles: makes them less likely to click to • The implementation of another site where they must build a high-levels of new relationship. This is traditionally personalization is not a known in Economics as “switching trivial technical challenge costs”. The result is increased value, and may require deep utility and satisfaction each time the pockets. It can include the site is accessed and an increase in ability to dynamically loyalty over time. There’s no doubt change content from that personalization represents a different sources, layout, deeper level of relationship with users design elements and and, therefore, is highly valued by frequency of advertisers and business partners. communications; Achieving the goals of personalization ©TerraForum Consultores 10
  11. 11. • Management of the undifferentiated or unbranded content operation: a committed will likely have its value reduced. High technical and editorial team quality proprietary content, however, needs to work hand-in- will probably have its value increased. hand to keep the site; The emerging platforms (wireless, • Convincing the user to interactive TV, etc) will provide new invest the time: even sources of revenues to owners of leading mass-market “hard to get” content. All of sudden, portals that have overcome owners of large archives of content the technical and may also find hidden values in their operational challenges, still “idle libraries”. The digitization of face the hurdle that only a content and the Internet have minority of the users increased the value of archives by personalize their allowing much more efficient seaches, experiences (between 10% organization and distribution of large and 40% in the leading volumes of content. mass-market portals. Yahoo says 55 million of its One important caveat is that 166 million users have broadband and digitization of content revealed their identities and does increase the risk of piracy. This, personal preferences6. however, will be technically and economically solved. As during the introduction of cassette and VHS These high costs and operational tapes and more recently of music challenges mean that media downloads and peer-to-peer, the companies should embark on personalization efforts only after reaction of content owners seem to be highly exagerated. In the end, detailed cost-benefit analysis. Also, as however, technological evolution is they leverage their existing knowledge of their core audiences offline to unstoppable. If it has value for users, companies will likely deploy the develop their online offerings, the path resources and economic models to for true one-to-one personalization make it work. The recent moves of may not be necessary at all or be large music companies to offer reserved for specific promotional or sponsored applications developed with Napster-like services are a testimony to this. Hollywood studios after much partners or advertisers’ budgets. fear of piracy found very profitable Location and demographics based ways to live with VHS tapes. This is personalization opportunities that are not to say that fighting piracy will not straightforward should be definitely taken into account. continue to be a priority for content and software providers. Security and encryption can always be broken: the II. 4. Syndication & Subscription question is how attractive the risks and rewards of forgery will be. Low pricing The Internet can increase or decrease the value of content. It is making for end-users, for instance, is always a information and content more widely powerful deterrent. available for free. Therefore, ©TerraForum Consultores 11
  12. 12. The Internet has changed the cost the Internet syndication structure of the media industry. business: it collects articles Companies will increasingly have from various sources (400 higher fixed costs and lower variable plus) and categorizes them costs (distribution costs are usually using sophisticated filtering reduced with the Internet). That means software for further that media companies will need to find distribution (500 plus other new ways to increase distribution and sites in the first semester of “monetise” their proprietary content. 2000)7. Generally speaking the following • IBlast has recently options are available: partnered with more than • their own marketing efforts; 200 TV broadcasters in the • distribution partnerships; US to provide them with • syndication (private-label or movies, games and other co-branded business content. This company has models); developed a technology • pay-per-view business that will make use of the models. additional digital spectrum that all stations in the US Examples of syndication: were granted in order to The Internet increases the prepare for HDTV. Since opportunities for syndication by HDTV is still very making it a lot more economical to uneconomical (for a deploy the same content over and number of reasons beyond over again. A few interesting examples this paper), most of these are listed below: stations, however, prefer to • Reuters is a great example use the additional spectrum of a media company that to provide other digital has clearly leveraged the services. Internet to improve its bottom line through Examples of subscription models: additional syndication; Although subscription-based business • A good Canadian example models for large audiences are still a is Canadian Press: the big challenge, a number of publishers Internet has reinvigorated are testing different models or have its commercial/content found specific business niches on the syndication strategy; Internet for subscription (pay-per-view, • Looksmart is a new upstart pay-per-download, pay-per-byte, pay- that is powering the per-time): directories of many large- • On the b-to-b side many scale portals and media examples are available companies such as Excite, (EIU, Forrester, Thomson MSN and CNN; Corp., Yankee Group, Jupiter, etc); • Screaming Media is also an interesting new player in • On the consumers side the most notorious case is the ©TerraForum Consultores 12
  13. 13. porno industry with annual partnership with revenues of US$ 1.5 Newstand.com; billion8. • Microsoft has recently • The networked video announced that it will start games industry is another offering “premium” example that people will subscription services. It will pay for online include elements of the entertainment. Individuals portal MSN and of content pay $40 to $50 to buy the and products such as package software in the Encarta encyclopedia sotre and subscription fee program and Money, a of $ 10/month to play personal-finance online. Amongst the most program11. popular multiplayer games • Marketwatch.com (owned are Ultima (with 230,000 by CBS) plans to grow its online accounts from 114 licensing and subscription countries) and EverQuest revenues to about 50% of (with 360,000 subscribers revenues in 2001. One and close to 90,000 example of such deals concurrent users online at includes the one with the peak hours)9. Learning Network to offer -- • Intertainer streams more via paid subscriptions -- than 500 hours of interactive, online personal- Hollywood hits, classics, finance courses. TV shows, music, videos • MTV is starting to test a and charges $3.99/film. subscription model for The users can watch it as music downloads. Users often as they want over a will pay either monthly fees 24-hour period10. or per music downloaded. • Hollywood Media, however, The proposed system will with its deep archive of protect the rights of artists entertainment news, is and label companies. another interesting Microsoft, Real Networks example and and Yahoo in partnership Britannica.com has recently with Sony and Universal started charging for are also working on similar content; business models; • The Wall Street Journal is a • MLB Advanced Media LP, good example of premium the online arm of Major content being sold to League Baseball, has relative large audiences. launched an Internet The New York Times has subscription service for started to offer the baseball fans: users will be complete paper for able to subscribe to both subscription through a video and radio services. The video service allows ©TerraForum Consultores 13
  14. 14. users to assemble server product aimed customized video albums that enables publishers, and the radio service will online content allow users to receive live distributors and broadcasts of all major resellers to secure and league baseball games. sell Adobe Portable Real Networks is paying Document Format Advanced Media $ 20 (PDF) based eBooks. million for a three-year deal - Amazon.com is already for the radio subscriptions. offering more than It’s likely that both the 2,000 titles for ebooks National Football League (in partnership with and the National Hockey Amazon). " # $ % League will be launching paid services in the near II. 5. Multi-channel Integration future12; • Yahoo has recently Mass media properties already start announced another the Internet game with one of the most significant subscription- precious assets: a loyal audience that based content: real-time trusts its brand and content. More stock quotes; often than not, media companies will • Last, but not least, The ITV benefit from integrating their online and ebooks will also put and offline content. The Internet tremendous pressures on provides extended reach and media companies to functionality for media companies. It develop new business allows for the enrichment of traditional models based on pay-per- content. No other medium can view or pay-per-download. compete with the Internet when it - The powerful Gemstar, comes to interactivity, participation for instance, has and development of data based recently launched a content (e.g. instant sports’ statistics). reading device that Technology convergence will certainly allows publishers to change the way that people receive easily deliver any book, and interact with digital content. Media magazine or companies will need to follow newspaper over a technology and behavior changes very standard telephone closely, leverage their offline credibility line. and develop creative ways to integrate all mediums. Integration could be as - Adobe, on the other simple as repurposing offline libraries hand, has partnered or as complex as providing real-time, announced a new ©TerraForum Consultores 14
  15. 15. two-way interaction between online corporation will need to have and offline content (see figure below): interactive elements13: “The days of commissioning United Kingdom’s BBC, for programs are over; we are going to instance, provides some clues to be commissioning projects. the kind of demand we will be Programs without interactive TV seeing in the in the near future. rights just won’t get acquired.” Ashley Highfield said in a recent show that any future programming funded or acquired by the Levels of Content Integration There are many interesting examples - research that showed that of high levels of content integration, a large portion of MTV including real-time integration: audience already watched TV and surfed the Internet • MTV provides a good example simultaneously; of significant integration - advertisers’ request for between online and broadcast. multi-channel packages The stated goal of the company is to create “a • The Game Show Network, on multimedia version of the MTV the other hand, provides a brand”. The project called good example real time MTV360, which is expected to integration between TV and the be fully implemented by July Internet. Viewers of the 2001, will allow users of the network’s “Hollywood MTV site to watch the two Showdown” are able to play broadcast channels owned by along with the contestants in the company directly in the real time15. site. The main drivers of the projects include14: • MTV Brazil is another example where real time integration ©TerraForum Consultores 15
  16. 16. depended a lot more on interactive television (ITV), broadband creativity than on technology access will also become mainstream power: As early as 1997, the (in the next main section of this paper, broadcaster was including a we discuss in the detail the broadband live moderated chat to some of opportunity). its shows. The lines of the chat appeared at the bottom of the For media companies and content screen while the show was providers in general, these two trends being broadcast. CNN has represent major challenges. These started doing the same thing companies will need to develop since the merger between competencies not only in the TimeWarner and AOL. production of new rich media applications (animation tools, audio • CBC in Canada has used its and video streaming), but also in the web site in many instances to identification of new content areas that provide in-depth coverage of stand to benefit from wireless and news and stories covered in interactive television. TV and radio broadcasts. Both on the wireless and ITV, media • 41,4% of FOLIO 500 companies and content providers will magazines in the US already need to navigate through a myriad of provide e-newsletters. More different technological platforms and impressive, however, is the solutions. Some are proprietary, fact that of the clickthrough others rely on open platform concepts. rates for these e-newsletters Different choices in terms of are over 20% for 42% of partnerships will require very different publications. levels of technological skills, financial commitments and control over the user experience. Media companies will II. 6. The Wireless and Interactive TV also need to decide between short- opportunities term rewards and long-term bets. The first five years of the world-wide- ITV web were clearly developed around the PC. The first few years of the new Interactive television (ITV) is exploding Millennium will see an even greater in Europe and will be complete speed of growth of the Internet. This mainstream in the next few years. time, TV and wireless access (cell Murdoch’s BSKyB launched of ITV phones, PDAs, etc) will be responsible was a major success in the UK: in less for most of the growth in the number of than a year, more than 50% of its users of the Internet. In the developing subscribers signed-up for the service. world, in particular, these two Despite a slow start, ITV will also platforms or devices are a lot more become mainstream in North America. prevalent than computers. In the Various research companies point to a developed world, besides the tremendous growth in the next few tremendous growth in wireless and years. The number of ITV households ©TerraForum Consultores 16
  17. 17. is expected to reach 17 million16 by broadcasts. Vendors include 2002, close to 40 million households ACTV and OpenTV. by 200417 and 50 million by 2005. • Eletronic Program Guides (EPGs): it provides interactive In North America, NBC seems to be access to TV schedules and the TV Network that is most tuned with information about programs. the future of ITV. It has created a This is already a big separated division: The ValueVision business.Gemstar, the leading Enhanced Broadcast Technologies player in this market, already Group. This division will produce counts with more than 10 interactive services for all of NBC' s million subscribers and is enhanced TV broadcasts, including: expected to be taking in more CNBC, the DirecTV Virtual Channel, than US$ 8.5 billion in ad The Tonight Show With Jay Leno, revenues by 200521. Saturday Night Live, TNBC, USGA Events, The French Open, American • Video on Demand (VOD) and Century Golf Championship, LPGA Digital Video Recorders: VOD Events, Notre Dame Football and the will take a while to become a PGA on the Wink platform and TNBC mass-market phenomenon due on WebTV and UltimateTV18. DirectTV to bandwidth limitations. is also very active in the interactive Vendors providing digital video programming broadcast race. In a servers include Concurrent, partnership with Wink, the company is DIVA, Intertainer, nCUBE and providing more than 2,000 hours/week SeaChange. A similar concept of interactive programs and or pseudo VOD is already advertising19. gaining wide acceptance: digital video recorders as ITV, however, comprises a number of supplied by Tivo or ReplayTV. different applications20: These vendors provide a very powerful hard disk that enables • Enhanced TV: it means the users to program the recording enhancement of broadcast of many TV programs. This signals (analog or audio) application is likely to provide through an overlay of text and pay-per-view solutions in the graphics. It may or may not near future. include a return-path. Key vendors of solutions include • Synchronized TV: it pushed Liberate, Microsoft TV, Wink, data to Internet applications in OpenTV, AOLTV and sync with TV programming. It Worldgate. leveraged the fact that the TV and PC are in the same room • Individualized TV: this solution in more than 50 million allows viewers to customize households in the US. The Key their viewing experience by vendor here is ACTV. choosing different cameras. This is a very likely application, • Internet TV: it includes for instance, for sports solutions that provide full access to the web (at a dial-up ©TerraForum Consultores 17
  18. 18. speed). To date the existing scheduled to start by the solutions do not support many end of the first semester of of the more advanced Internet 2001. If the experience with features such as java I-mode is a good reference, applications or streaming. It broadband wireless does provide, however, basic Internet will explode there. web browsing and email. Key It took NTT-DoCoMo only players are WebTV, Worldgate two year to acquire 20 and Liberate. million users of I-mode, • Digital set-top boxes: this is the which provides always-on ultimate full feature ITV that will Internet access and is provide high-speed data and mainly used for email. video interactivity and will • The Walt Disney Group is support all the applications already offering content in above based on complex partnership with DoCoMo operating systems, middleware and it expects this venture and hardware. to be profitable by the end of 2002. Wireless • Wireless advertsing is expected to start growing The opportunities for media very fast as of 2003 after it companies are certainly very exciting overcomes initial as well in the wireless space. In the technological hurdles. next few years, the most valued Some estimates put the content for wireless devices will likely global wireless advertising include location specific, time-sensitive marketing at around US$ or group-based applications. Carriers 15 billion by 200522. Most will need compelling content to keep wireless advertising is users engaged in a broadband expected to be “pull and environment. The stakes for the phone opt-in based ” as it is companies are really high and they will unlikely that people will put a lot of energy to recoup the costs accept being disturbed of their investments in the networks, without asking for a specific new product developments (e.g., new service or content. devices) and especially licenses: II. 7. The Broadband opportunity • In the UK, carriers paid circa US$ 34 billion for Users wireless 3G licenses (that allow broadband Today the great majority of users have transmissions). These dial-up connections and about 5 services are scheduled to million households have high-speed start in 2002. connections in North America. This is • In Japan, where companies changing quickly. By 2003, it is did not have to pay for estimated that 33% of home users will those licenses, broadband have broadband access23. By 2005 3G wireless services are ©TerraForum Consultores 18
  19. 19. this number will be 50 percent and access their connections many (Forrester). That translates in almost times during the day. The Internet is 40 million subscribers and a market part of their daily routines. They that will be more important than the certainly represent a better opportunity dial-up access. Worldwide estimates for advertisers and ecommerce put the number of subscribers players: they feel more secure between 88.5 and 93.6 million24. Most shopping online and are more likely to online home users already have do impulse buying. Because of speed multimedia PCs. Multicasting of surfing they may, however, be more technology is becoming more widely likely to engage in comparison- used. There is, therefore, a revolution shopping. in the making that will likely benefit the owners of proprietary and premium New applications broadband content. Large media companies (especially broadcasters) These are definitely huge changes that were not successful in that will take the Internet experience to establishing successful mass-market a very different level. Those who sites in the past have a renewed better understand the coming changes chance now. and act first will be better positioned to secure a strong future. Media It is also worth noting that broadband companies are likely to be highly is widely available in corporate affected by these changes. Media America. Currently more than 17 companies have deep experience in million office workers and 12 million creating and producing content that is college students have fast engaging and a lot more complex than connections. It’s estimated that by what the traditional text-based Internet has produced to date. New entrants, 2003, 71 percent of all businesses will however, are looming everywhere and have broadband connections in North the most successful ones are bound to America. On the other hand, in a pose a direct attack on traditional couple of year interactive television media players in their own turf beyond will truly make the Internet part of the PC constrained Internet. everyone’s life. The number of TV sets is much larger than telephones and Defining broadband can be a PCs combined. This is true in the challenge since different people have developed world and even more different points of view about what it important in the developing world. really means. It’s better, therefore, to Broadband wireless applications will focus on the applications and the kind also be a reality in a number of years. of bandwidth that is necessary to support them. The table below helps Broadband users are wealthier, tend to understand what kind of bandwidth to be more experienced users, surf for is required for developing various longer periods of time, use it more services. often, are more loyal to specific sites Broadband Service and Required Bandwidth ©TerraForum Consultores 19
  20. 20. SERVICE DOWNSTREAM - Finally it is also clear that satellite UPSTREAM BANDWIDTH BANDWIDTH providers have been working with Broadcast TV 6-8 Mbps 64 Kbps digital TV for a long time, while Home shopping 1.5 Mbps 64-384 Kbps cable is just entering this arena Distance learning 1.5-3 Mbps 64 Kbps with very recent roll outs of digital Video on demand 1.5 Mbps 64 Kbps set top boxes. Computer gaming 1.5 Mbps 64 Kbps Video conferencing 384 Kbps – 1.5 Mbps 384 Kbps –•1.5 In comparison with the other Mbps Source: Red Herring, November 13, 2000 technological solutions for delivering broadband content, it is Satellite Internet reasonable to say that satellites are well positioned to: It’s clear that cable companies and - Deliver point-to-multi point Telcos have the lead in North applications at a very low cost. America. Satellite Internet providers, - Compete in rural areas and certain however, are also well positioned to urban areas where multi-dwelling reap significant rewards as interests in is prevalent and provides good broadband soars. reception topography. - Provide download applications. • Important technological advances are improving the • The satellite business is a capital price/performance ratio of satellite intensive, high-fixed business that communications. can be very competitive if capacity - Satellite providers are certainly in a is maximized through caching very strong position in Europe with techniques. more than 30 million customers. - IP multicasting and Package - In North America, the competition delivery are important ways to from cable and DSL is certainly optimize bandwidth. They provide much stronger. Yet, there is the idea of interactive but are in enough scale to sustain viable fact “pseudo-broadcast”. Instead of business models. There are more transmitting individually, this than 15 million subscribers in technical solution collects most North America (around 1 million in common requests and broadcast Canada). to everyone. That puts a lot of - Two-way systems are already value in the development of being deployed in North America. technical solutions, services and StarBand is already offering this incentives (price tiers, for instance) service. It is anticipated that in the to have everyone see the same next few years, we will see much content. lower transponder costs (next • Satellite players will be able to generation: Ka band – 18 to 31 integrate their TV and Internet GHz) and smaller antennas (VSAT offerings and leverage their strong – very small aperture terminals) position in the distribution value that will allow much more chain. widespeard two-way satellite - The gains can be seen in Internet access. programming, usage of bandwidth, savings in users’ receiver ©TerraForum Consultores 20
  21. 21. equipment and, finally, advanced negotiating position when dealing advertising & ecommerce with the existing providers of TV applications. programming. - Satellite networks offer the most - Single receivers for both the TV extensive menu of TV channels in and PC that cache high-bandwidth the current market. Consumers of content is already a reality. This these systems are getting more provides two very important cost and more comfortable with a huge savings opportunities: transponder array of options and sophisticated costs and users’ terminal costs program guides. This is an (equipment and installation important current advantage that savings). Self-provisioning or can be capitalized. install yourself is an important way - It is clear that Internet satellite to reduce ISP costs. players will have a strong Indeed, the fast increase in cable- great deal of value on online modem, xDSL and satellite (especially communities and will gravitate in Europe) connections is already to sites and services that fostering a growing list of popular facilitate video/multimedia applications: connections and offer • Search engines dedicated to templates to create, edit, store, multimedia content. publish and share multimedia • Software and music content. downloading and swapping • Remote multi-player games (already the most popular that are highly graphical and service). interactive will be enhanced by • Audio streaming (It’s possible broadband. Playstation2 points to have very large number of to the convergence of the digital radio stations), internet and gaming stations. information services – • High-quality voice & video chat broadcast news. and video email are just • On-line gaming (the sites with around the corner. the longest duration/visit), • Some interactive TV distance learning, on-line applications are already gambling and travel services becoming mainstream. Good are also growing very fast. examples include eletronic • Applications that provide deep program guides (e.g Gemstar integration and synchronization EPGs) and recordable digital of video streaming, text, flash video hard disk drives (e.g. animation and commerce TiVO). Both applications are (Yahoo’s FinanceVision is a becoming widely available on great example). digital cable and satellite systems. • Consumer applications that encourage the creation and • MPEG 4 format that allows sharing of rich media. The high-quality videos and movies younger generation places a to keep their standards on the net by use of sophisticated ©TerraForum Consultores 21
  22. 22. compressing algorithms. millions logons) and the Recent releases of Microsoft recent launch of her latest (Media player 8) and Real video clip, What it means to Networks (Real Player 8) claim be a girl, exclusively to have reached DVD level through AOL. quality if enough bandwidth is • Victoria Secret logged over provided (~1 MBps x traditional 10 million visitors and 500 ~ 6 MBps for tradtional TV million hits in 10 weeks in broadcast). 1999 with its first live • Content Delivery Netwroks are streaming video of a making it easier to deliver fashion show25; streaming content. They use a • MSNBC coverage of technique called “edge election night: about 20% network” that creates a of the site visitors, i.e., “parallel Internet” through the more than one million use of dedicated backbones people, chose to watch and distributed servers close to video broadcast through the users. Leading companies the Internet instead of in this space include AKAMAI, watching it through the TV. Speedera and Digital Island. On the same night, PBS' s NewsHour teamed up with The existing chain of distribution – WebTV and offered cinema, videocassette, television – is election coverage on an under attack and will have to be re- interactive platform. evaluated. Examples of compelling Viewers in any state could sites dedicated to short-length movies drill down for more detailed for the Internet are not hard to find: information by making SS, Ifilm, ON2, MediaTrip, Sightsound, choices to see election Intertainer(pay per view is happening returns by state or city, already!). There is already a great deal candidates' positions on of rich media content (animation, video the issues, acceptance and & music) produced exclusively for concession speeches and Internet distribution. There are many the like. Viewers could also examples of successful, high profile interact by sending e-mail media streaming cases. A few to others and taking instant examples come very easily to mind: polls. • The Blair Witch Project, Episode 1; Some traditional broadcasters are • The Phantom Menace; already placing a lot of energy and money into broadband and streaming • The Paul McCartney concert at the Cavern video applications. MSNBC is (which was seen by more probably leading the pack. CNN, ABC, CBS MarketWatch , than 3 million people); Washingtonpost.com and Yahoo • Madonna’s London concert Finance are also making interesting (which had more than 9 strides in the broadband news front. ©TerraForum Consultores 22
  23. 23. Michael Silberman, executive editor of MSNBC, has recently shared the "The power of pictures and the following perspective on the emerging interactivity of the Internet to create role of broadband for a news depth, context and perspective will company: create a new form of journalism that we haven' yet begun to appreciate. t Ultimately, you want to provide "At MSNBC we think about users with more depth on every broadband in two ways: as rich story — unedited interviews with content, as video, as the CEO, locker room interviews animation, about how we can with sports stars. You' be d combine those elements into a surprised how many people will single experience. And we want to watch." think about it as an always-on connection, making it much The barriers of entry and the financial more of an Internet appliance, stakes are, of course, much higher in letting you have the option of the broadband environment. having a kick-back, more Production costs can easily escalate. passive entertainment Streaming media is still highly experience."26 dependent on scale. Someone will have to pay for these services. FeedRoom is an interesting new Media companies will have to develop entrant worth noting too. It is a not only creative content, but also broadband-only site that aggregates creative risk and revenue sharing video content from a network of agreements with all other players that stations. The company has many high- make it happen: software and profile investors including: NBC, hardware providers, the “owners” of Warburg Pincus, Intel, Tribune the distribution and consumer Ventures, etc. The company collects relationships (MSOs, ISPs, portals, the latest news, business, sports, etc) and ecommerce players. weather and traffic video from networks, local TV stations and IV. Understanding the needs of independent news providers and advertisers combines them in a rich-media format that melds television with Internet From the perspective of a media technology. It includes feeds from seller, the audience is the product and NBC, Tribune Broadcasting, Reuters, the advertiser is the customer. Like Fox and many other local stations. any business proposition, the onus is The ultimate goal of the company is to on the seller to demonstrate the value start offering personalized, interactive of their product to the potential buyer. newscasts combine with in-depth links Understanding the needs of the buyer to information on the top stories of the is the key to maximizing the value of day. Its West Coast VP also offers the product. However, maximizing interesting perspectives on the product value will not increase changing landscape of Internet news: revenue if there is not any site traffic. ©TerraForum Consultores 23
  24. 24. Additional content and functionality will Pepsi recent hyped deal with Yahoo is result in increased inventory only if it a good example. Pepsi paid about serves an audience need. Audiences US$ 8 million to run a promotion on and advertisers reward media sellers Yahoo. This promotion resulted in the who achieve this equilibrium with collection of more than 2 million eyeballs and advertising dollars. personal profiles of Pepsi products drinkers who went to the site to The measurability of online media receive prizes. It was indeed very results allows for a very high level of successful for Pepsi: it costed one-fifth accountability that, in turn, makes of the price of traditional direct mail online advertisers especially ROI- promotions and was completed in one focused. ROI is the measure of media third of the time28. efficiency, which is a function of the effectiveness of media in achieving The high level of accountability is the objectives relative to the price of most distinctive aspect of Internet placement. Effectiveness of media advertising. Pay for performance depends on how well the ad contracts are on the rise (offline as placement generates response and well). The accountability is, however, a qualifies an audience. Extensive double-edged sword. While the testing of creative, format and media Internet allows advertisers to develop opportunities allows for rapid very sophisticated tracking optimization of Internet based mechanisms to measure the business campaigns. These are the impact of the advertising dollars spent, fundamental drivers of Internet media it also holds Internet companies to a value. level of measurability that was never imposed on traditional media. It’s well Advertisers value the ability to identify known that many traditional and target the appropriate audience. advertising budgets have been wasted This requires sophisticated ad serving on ineffective media campaigns (due systems that skew ads to customers to wrong creative, audience, product that are most likely to buy or get features, etc). In the Internet world, information about the service or these wasteful campaigns are rapidly product. Plain banners placed on a uncovered. random rotation basis cost about $5 CPM while highly targeted banner ads In order to avoid being evaluated only can draw as much as $150 CPM or on the merits of clickthroughs, the $300 CPM for a permission based front-runners in this space are email campaign on Yahoo27. developing more creative ways to work with advertisers and ecommerce The Internet also provides unique partners. They are creating opportunities for advertising partners opportunities for differentiation and to profile and better understand branding beyond the banner. The lines specific segments of a target market. between content and advertising are This, of course, is value-added for becoming very blurred in most leading advertisers that can, therefore, be portals. Media companies, however, profitably priced by media companies. are held to much higher degrees of ©TerraForum Consultores 24
  25. 25. editorial standards and may not have how innovation can help bring as much leeway in this respect. Multi- traditional advertisers to the Internet: channel and cross-media opportunities • Volvo launched its S60 sedan that leverage the advantages of each exclusively through Excite specific medium seem to be the Canada in Canada and differentiating point for traditional through CBS-Sportsline and media companies competing for WebTV in the US. In both Internet advertising budgets. In fact, cases, the sites created special integrated approaches that combine sweepstakes to drive users to television with online media or that learn about the car. The last incorporate media partners are point in the differentiated expected to grow dramatically. The campaign for VOLVO included growth of divisions specialized in a full-color promotional video multi-media buying and plans (e.g. available on wireless McCann-Erickson, Unilever) is a PocketPC PDAs. strong sign of the increasing • Yahoo worked with Pepsi in a importance of this. multi-million exclusive campaign to create special A good example of this multi-channel web-casting sponsored events approach is AOL Time Warner’s that the preceded the Oscar recent announcements of large party in 2001. advertising deals with leading brands including: Continental Airlines, Kinko’s • CBSMarketwatch worked in a and Princess Cruises. The packages very innovative campaign with with these advertisers include Internet, Kmart (bluelight.com): besides print and TV. In the worlds of AOL traditional online placements, Time Warner COO, Robert Pittman: Marketwatch has turned its page “blue” to highlight the "Our businesses are working launch of the BlueLight Special together to develop ground- at Kmart stores nationwide and breaking integrated programs online at BlueLight.com that not only create more benefits for partners, but also It’s becoming clearer that the next transform the way they interact phase will be about interactive with consumers. New and advertising (as opposed to Internet existing partners are clearly advertsing). Indeed, advertising and e- interested participating in on commerce stand to benefit hugely these programs and we will from broadband regardless of the continue to work with them to medium of distribution (wired Internet, develop additional Interactive TV, wireless etc): breakthrough cross-brand initiatives."29 • Broadband will allow for live interactions that create Volvo, Pepsi and Kmart emotional bonds with the users (bluelight.com) campaigns, on the and strengthen relationships other hand, provide good examples of between business and ©TerraForum Consultores 25

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